Thursday, June 30, 2005
Top of the Heap
Thanks to cutting-edge logistics and e-commerce systems, Copart is sitting pretty in the salvage business.
Not long ago, Victor Viaden spotted a badly dented 1995 Ford (F) Probe on an online auction site -- and pounced. Viaden, who lives in Minsk, Belarus, and sells refurbished cars, won the wreck with a high bid of $150. He paid $3,100 to transport it to Belarus and fix it up, and sold the Probe locally for $4,500. "It's easy to get good cars now," he says.
Viaden bought the Ford from Copart, a Northern California company that is fast becoming the world's sultan of salvage. With $400 million in sales last year, Copart processes roughly 40 percent of all cars salvaged in the United States -- about twice as many as its closest competitor. On track to grow sales 13 percent in 2005, the public company has already boosted net profit 42 percent to $46 million during the first half of its current fiscal year, largely by bringing modern management to the junk business. "People are surprised when they see our headquarters," Copart president Jay Adair says of his company's sleek offices in Fairfield, Calif. "This isn't Sanford and Son."
True, but Fred and Lamont might recognize the business model. Copart acts as a broker, selling wrecks on behalf of insurance companies. Offering state-of-the-art order tracking, an online database with information on 225,000 cars, and 110 facilities in 42 states, Copart attracts big sellers. Vehicles sourced from State Farm alone accounted for nearly 12 percent of Copart's 2004 revenue, and Kemper Auto and Home Group now uses Copart exclusively to sell its salvaged vehicles.
Founded in 1982, Copart used to fax vehicle descriptions to 8,000 potential buyers. In 1997 the company made its foray onto the Web, putting inventory listings online. Today, Copart's 96-person IT department sends nearly 24,000 e-mail messages daily to buyers, and its software immediately notifies towing services when the company acquires a wreck.
In 2003, Copart replaced live junkyard auctions with Internet-based ones. In Copart's online auctions, unlike eBay's (EBAY), Adair's recorded voice provokes bidders with "Going once, going twice," which insurance execs say jacks up prices. In 2004, Copart's online auctions attracted 44,000 bidders -- 10 percent more than at the company's live auctions the previous year. Vehicles sell four times faster since the switch: A mangled Ferrari went for $576,000 in just eight minutes. Buyers save, too, because they never have to travel to a yard. "Copart cut significant cost from the process," says Craig Kennison, an investment analyst at Robert W. Baird & Co.
An unexpected benefit of online selling has been a booming international business. With the weak dollar and strong foreign demand for American cars, Copart now has customers in places as far away as Cambodia and the United Arab Emirates. Twenty-two percent of cars sold by Copart are shipped overseas, compared with less than 11 percent two years ago.
Of course, software might not be an enduring barrier to competitors' entry into salvage. But with Insurance Auto Auctions -- Copart's nearest rival -- planning to go private after poor results during much of the last four years, Copart is going, going, going. "We're in the infancy of this thing," Adair says. Given his success so far, that's not just trash talk.
By Andrew Tilin, April 20, 2005
Not long ago, Victor Viaden spotted a badly dented 1995 Ford (F) Probe on an online auction site -- and pounced. Viaden, who lives in Minsk, Belarus, and sells refurbished cars, won the wreck with a high bid of $150. He paid $3,100 to transport it to Belarus and fix it up, and sold the Probe locally for $4,500. "It's easy to get good cars now," he says.
Viaden bought the Ford from Copart, a Northern California company that is fast becoming the world's sultan of salvage. With $400 million in sales last year, Copart processes roughly 40 percent of all cars salvaged in the United States -- about twice as many as its closest competitor. On track to grow sales 13 percent in 2005, the public company has already boosted net profit 42 percent to $46 million during the first half of its current fiscal year, largely by bringing modern management to the junk business. "People are surprised when they see our headquarters," Copart president Jay Adair says of his company's sleek offices in Fairfield, Calif. "This isn't Sanford and Son."
True, but Fred and Lamont might recognize the business model. Copart acts as a broker, selling wrecks on behalf of insurance companies. Offering state-of-the-art order tracking, an online database with information on 225,000 cars, and 110 facilities in 42 states, Copart attracts big sellers. Vehicles sourced from State Farm alone accounted for nearly 12 percent of Copart's 2004 revenue, and Kemper Auto and Home Group now uses Copart exclusively to sell its salvaged vehicles.
Founded in 1982, Copart used to fax vehicle descriptions to 8,000 potential buyers. In 1997 the company made its foray onto the Web, putting inventory listings online. Today, Copart's 96-person IT department sends nearly 24,000 e-mail messages daily to buyers, and its software immediately notifies towing services when the company acquires a wreck.
In 2003, Copart replaced live junkyard auctions with Internet-based ones. In Copart's online auctions, unlike eBay's (EBAY), Adair's recorded voice provokes bidders with "Going once, going twice," which insurance execs say jacks up prices. In 2004, Copart's online auctions attracted 44,000 bidders -- 10 percent more than at the company's live auctions the previous year. Vehicles sell four times faster since the switch: A mangled Ferrari went for $576,000 in just eight minutes. Buyers save, too, because they never have to travel to a yard. "Copart cut significant cost from the process," says Craig Kennison, an investment analyst at Robert W. Baird & Co.
An unexpected benefit of online selling has been a booming international business. With the weak dollar and strong foreign demand for American cars, Copart now has customers in places as far away as Cambodia and the United Arab Emirates. Twenty-two percent of cars sold by Copart are shipped overseas, compared with less than 11 percent two years ago.
Of course, software might not be an enduring barrier to competitors' entry into salvage. But with Insurance Auto Auctions -- Copart's nearest rival -- planning to go private after poor results during much of the last four years, Copart is going, going, going. "We're in the infancy of this thing," Adair says. Given his success so far, that's not just trash talk.
By Andrew Tilin, April 20, 2005
